Silver Hits Seven-Month Low, Gold Erases Boost From Cyprus

By Brendan Conway

The malaise continues for precious-metals investors. Silver’s price around $27.30 is a seven month low after today’s drop of 2%, while gold is back to $1,581, erasing the gains the metal logged when Cyprus took over the headlines in Europe.

The better feeling in Europe this morning is one culprit. But so is the idea that central banks aren’t going to be as aggressive as once thought — and inflation is nowhere on the horizon.

“On the one hand, the global economic recovery has been robust enough to juice US stocks at the expense of safe havens like gold,” writes Dow Jones Newswires’ Matt Day. “But the recovery has been tenuous in just the right places to limit demand for industrially focused silver, platinum and palladium.”

The Bank of Japan — which investors have eyed as the next big source of stimulus — is still more a focus of talk than quantitative easing.

Closed-end funds are trading at or just below their net-asset values, a sure sign that investors are depressed. Central Fund of Canada (CEF) is down 1.6%, Sprott Physical Trust (PHYS) is down by 1.4%. When it comes to ETFs, iShares Silver Trust (SLV) has slumped 2.6%, while SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) are down 1.3%.

Jordan Roy-Byrne, a gold bull and editor of the newsletter The Daily Gold, isn’t deterred. “2013 will be a transition year and a year of cyclical change,” he writes to clients overnight. “Equities are headed for a cyclical top while commodities led by precious metals are at a cyclical bottom. … Ultimately, commodities will be the initial beneficiary of the secular peak in bonds. Then when the commodity bull has run its course, a transition from commodity leadership to the new equity bull market will take place (likely in 4-5 years).”

Say this much: Roy-Byrne’s got the data to show how unusual the recent gold selloff has been. Speculative gold short positions recently hit a 14-year high, he notes, citing BullionVault and St. Louis Fed data. Holdings in the SPDR Gold Trust are at an 18-month low. Public opinion on gold is at the lowest in nearly a decade.

He’s also watching the Rydex Precious Metals Fund (RYMNX) as a gauge of retail-investor sentiment: Its assets have fallen to May 2012 levels, he writes.

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